Azerbaijan needs tax reforms – int’l auditing company (UPDATE)

Azerbaijan needs to carry out a number of tax reforms to further improve its position in the Paying Taxes report, a partner of the PwC international auditing company in Azerbaijan Movlan Pashayev said.

He made the remarks Dec.4 at a press conference on the presentation of the Paying Taxes 2016 report prepared by the World Bank together with the PwC international auditing company.

"Many aspects of administration in the law need to be reformed," he said. "There are three main points, one of which is tax audits."

He said that it is necessary first of all to improve the methodology of tax audits.

"We have to choose the methods that are optimal for both the collection of taxes and the convenience of taxpayers," he said. "The second important point is the creation of an effective mechanism for resolving tax disputes. It provides for the improvement of many aspects, ranging from guaranteeing of these contestation mechanisms in the tax legislation till reforming the entire judicial system for more efficient resolution of tax disputes."

Pashayev went on to add that it is also very important to improve the mechanism for calculating VAT. He said that this question is quite controversial in the legislation and it is necessary to conduct a series of reforms for more convenient payment of VAT.

"Throughout 20 years, uncertainty in the issue of return of overpaid taxes has remained," said Pashayev. "Now Azerbaijan has the ability to cover other tax liabilities at the expense of overpayments, but the return of this amount is probably very difficult."

The third main point is to improve the mechanism for dialogue between business and tax authorities, he said.

"Today, this dialogue exists, but it is rather episodic and sporadic," said Pashayev. "It is not regular and comprehensive. We think that if we manage to establish a mechanism for regular communication, both the tax authorities and taxpayers will benefit from it."

According to the report, Azerbaijan ranks second in Central Asia and Eastern Europe on the least number of taxes.

In total, there are seven kinds of taxes in Azerbaijan. Belarus, Kazakhstan, Macedonia and Russia share the second place with Azerbaijan. Leadership on this indicator in the region belongs to Georgia and Ukraine with five types of taxes each. Azerbaijan ranked fourth in the global rating.

Also, in Central Asia and Eastern Europe, Azerbaijan ranks eighth on the least amount of time required for payment of taxes (195 hours).

However, the authors of the report said that the tax burden in Azerbaijan (39.8 percent) is higher than in average in Central Asia and Eastern Europe (35.2 percent), but lower than the global index (40.8 percent).

Azerbaijan took the 34th place in the Paying Taxes 2016 ranking.

Paying Taxes 2016 report has been published throughout the last ten years.